What “Transshipped” Really Means for Backpack and Outerwear Manufacturers in Vietnam

And Why It Matters Now More Than Ever

In the ever-shifting landscape of global trade, few words send chills down the spine of manufacturers in Vietnam like “transshipped.” For backpack and outerwear companies like ours, Kowide Outdoors, with our manufacturing facility in Vietnam, the term has taken on new weight, especially in light of the United States’ recent crackdown on transshipped goods and the expansion of tariffs.

Let us take a closer look at why this development is relevant to Kowide Outdoors’ future and how we’re preparing for a new phase of international scrutiny and compliance.

The Current Tariff Situation with the U.S.

As of July 2025, the U.S. has significantly increased duties on imports from Asian exporters—placing Vietnam at a 20% tariff rate on most exports and a steep 40% levy on goods deemed "transshipped" through Vietnam from other countries. This effectively doubles the previous 10% reciprocal tariff that had been in effect since April. In contrast, China continues to face substantially higher U.S. tariffs—averaging over 54% on key categories and reaching 145% on many others following the so-called “Liberation Day” tariffs. The rationale is straightforward: Vietnam now serves as a buffer zone in the U.S. strategy to curtail Chinese exports, but the line between legitimate Vietnamese manufacturing and re‑exported Chinese inputs is under intense scrutiny. In short, while Vietnam enjoys a relatively low 20% rate, any missteps in proving genuine origin can trigger the punitive 40% tariff, leaving Chinese-heavy supply chains severely at a disadvantage.

Read our blog for more insight into the ongoing tariff war and manufacturing in Vietnam.

What Does “Transshipped” Mean?

At its core, transshipment refers to goods being shipped from one country to another via a third country. This practice, when done transparently, is common and legitimate. For example, goods passing through a hub like Singapore or Hong Kong for logistical reasons.

However, when the origin of the product is intentionally obscured or falsely declared to avoid tariffs, it becomes an illegal transshipment. This is where the issue lies.

The U.S. government is now aggressively investigating whether Chinese-origin products are being rerouted through countries like Vietnam, relabeled as “Made in Vietnam,” and then exported to the U.S. market with a lower tariff. This is seen as a way to sidestep the stiff tariffs imposed on Chinese goods since the U.S.-China trade war began.

How China Has Used Transshipment to Circumvent U.S. Tariffs

Since the onset of the U.S.-China trade war in 2018, Chinese exporters have been facing steep tariffs when selling goods directly into the American market. In response, some Chinese firms began rerouting their exports through third-party countries, especially Vietnam, Malaysia, Thailand, and Indonesia, as a way to disguise the true origin of their products and gain access to lower tariff rates.

This tactic, known as illicit transshipment, often involves shipping unfinished or even fully assembled Chinese goods to neighboring countries, where they are either relabeled or undergo minimal processing. The products are then exported to the U.S. under the guise of being “Made in Vietnam” (or elsewhere), avoiding the high duties levied on Chinese-made goods.

Vietnam, in particular, has been a prime target for this strategy due to its strategic location, fast-growing manufacturing base, and favorable trade relationships with the U.S. While many legitimate Vietnamese factories operate above board, the sheer volume of rerouted Chinese goods has drawn intense scrutiny from U.S. authorities. In several high-profile investigations, U.S. Customs and Border Protection (CBP) has uncovered instances where Chinese electronics, furniture, steel, and even textile products were mislabeled as Vietnamese exports with only superficial changes.

This growing trend has prompted the U.S. to ramp up enforcement, including:

·       Auditing Vietnamese exporters

·       Imposing retroactive tariffs, now called “transshipped levies,” on suspicious shipments

·       Warning American importers about liability if they unknowingly purchase transshipped goods

Why Backpack and Outerwear Manufacturers Are in the Crosshairs

The backpack and outerwear industries are heavily globalized. Many components, such as zippers, buckles, and specialty fabrics, continue to be sourced from China. Assembly may occur in Vietnam, but the lines of origin can become blurred.

Suppose most of a product's materials originate from China and are simply rerouted through Vietnam without undergoing substantial transformation. In that case, U.S. Customs may determine that the country of origin remains China, not Vietnam.

This puts legitimate factories in Vietnam at risk of:

•            Being accused of transshipping, even when operating within the rules

•            Facing U.S. import bans or retroactive duties

•            Suffering reputational damage with global buyers

What Does “Without Substantial Transformation” Mean?

In the world of international trade, the “country of origin” of a product is not simply where it was last handled; it is where it was substantially transformed. But what does that mean?

Substantial transformation occurs when a product undergoes a process that results in a new and different article of commerce, characterized by a distinct name (or SKU), nature, or use. If a product doesn’t meet that standard, it may still be considered to have originated from the country where its core components were sourced, not the country where final assembly occurred.

This is a significant issue, particularly in our industry, where:

·       Many key materials are sourced from abroad.

·       Assembly can sometimes be viewed as low-value labor.

·       “Rules of Origin” are increasingly being enforced more strictly.

The Consequences: If a backpack or outerwear garment is deemed not to have been substantially transformed in Vietnam, the U.S. may apply retroactive tariffs, issue penalties, or even ban the import. That’s why proving substantial transformation is crucial for maintaining compliance. Something that Kowide Outdoors takes very seriously and proactively works together with our clients to provide the needed documentation to substantiate that there was sufficient “substantial transformation”.

What This Means for Our Business and the Industry

For manufacturers like us, with factories in Vietnam, this is a critical moment of reckoning. We must ensure complete transparency, traceability, and compliance to protect not only our business but also that of our clients and partners.

Here’s what we are doing—and what we urge others in the industry to do:

• Material sourcing diversification: We actively diversify our supply chains away from China. Local Vietnamese and ASEAN suppliers are being prioritized to reduce dependency.

• Documentation: We document everything. We maintain meticulous records to demonstrate that products manufactured in our facility have undergone substantial transformation. This includes bills of materials, supplier invoices, photos of production processes, and employee payroll records.

• Investment into compliance: We collaborate with trade compliance consultants and conduct internal audits to help our clients ensure compliance with U.S. origin rules under customs law.

• Partner with ethical brands: Our clients’ reputation is as important to us as our own. We prioritize relationships with U.S. and European brands that prioritize compliance, transparency, and sustainable manufacturing practices.

The Power of Documentation: Proving Our Products Are Truly Manufactured

In today’s heightened enforcement environment, documentation is no longer just good practice; it’s essential protection. At our factory, we go beyond standard bookkeeping to maintain a robust paper trail to prove that products manufactured for our clients underwent substantial transformation. This includes detailed bills of materials (BOMs) showing the exact origin of each input, supplier invoices to verify sourcing locations, production photos that track each stage of assembly, and even payroll and timesheet records to demonstrate the local labor involved.

We also document packaging, shipping, and quality control processes to provide our customers with all the necessary paperwork, ensuring regulators have complete visibility into the supply chain. This level of traceability not only protects us from accusations of transshipment but also gives our global clients confidence that they’re working with a transparent and compliant manufacturer.

Looking Ahead: Risk or Opportunity?

While the transshipment crackdown presents challenges, it also presents an opportunity for legitimate manufacturers in Vietnam, such as us, Kowide Outdoors, to differentiate ourselves. Those who invest in clean, transparent supply chains will become more trusted partners to global brands that are now, more than ever, seeking responsible sourcing and manufacturing.

At Kowide Outdoors, we welcome this scrutiny, not because it’s easy, but because it will raise the bar and clean up the industry. We are a proud Taiwanese company manufacturing in Vietnam, and we’re committed to doing it right.

For legitimate manufacturers in Vietnam, such as us, this presents both a challenge and an opportunity. While our clients, and by extension ourselves, face greater scrutiny, we also have the opportunity to stand out by demonstrating our transparency and commitment to ethical trade practices. The more we can demonstrate that we manufacture products authentically and ethically, the more we protect our own business and that of our clients.

Our Commitment

To avoid these risks, Kowide Outdoors ensures that products manufactured at our factory are not only assembled but also genuinely manufactured. That includes:

·       Adding significant value through design, patterning, sewing, and quality control.

·       Documenting every step of the transformation process.

·       Training staff to understand rules of origin and compliance.

In today’s environment, “Made in Vietnam” must mean more than a label—it must reflect a fundamental, traceable transformation. We’re committed to making sure it always does.

KOWIDE OUTDOORS – Who We Are

We are a Bespoke Backpack and Outdoor Apparel Manufacturer from Taiwan

A leading OEM manufacturer with over 50 years of experience supplying products to world-renowned brands across Europe, Asia, Australia, and North America. Our world-class production facility in Vietnam, situated within easy reach of Ho Chi Minh City, is ideally suited to cover all manufacturing needs, from R&D, sourcing, and prototyping to bulk production.

Through technical expertise, ethical management, and rigorous quality control, Kowide Outdoors consistently strives to exceed client expectations, taking pride in helping clients achieve success by delivering the highest level of quality and unparalleled customer service.